Ghana’s economy, after five years of NDC, is in reverse gear. Delivering the 1st Alhaji AliuMahama Memorial Lecture on November 13, 2013, the 2012 Vice Presidential Candidate of the New Patriotic Party, Mahamudu Bawumia put it poignantly so.
The economist points out, “What is remarkable about this state of the economy is that it is occurring at a time when the government has had access to more financial resources in terms of tax and non-tax revenues as well as borrowing more than any other.”
Dr Bawumia reminds us of the fact that what was good about the (P)NDC ended before the Fourth Republic and that they have proven in time and time again, election after election that they don’t have the discipline and courage to do what is required to make Ghana better.
He recalls, “The economy, between 1983 and 1991, benefited from a disciplined implementation of the government’s vision along with the fiscal and monetary discipline to accompany its implementation. However, the economic policy framework which had brought about macroeconomic success in the 1983-1991 began to unravel with the transition from the PNDC to the NDC after the 1992 elections.”
In short, the (P)NDC is not good for democracy; NDC is not good for Ghana today; not good for our future. This is because they only focus on the next election and not on your next meal. They ignore economic discipline in their desperate attempts to win elections only to put the people through a four-year cycle of hardships.
Ghana’s opposition parties have no choice but to let the people understand this simple but important fact. It must be made to sink down into their election psyche. The NDC has just not done it. Two two-terms in office have told it all. Time to switch and switch them off.
Election year budget deficits
The budget deficit was, for example, 1.3% of GDP in 1991, under Chairman Rawlings’ military dictatorship. But shot up to 9.4% in 1992, the first election year in eleven years. Again, in the 1996 election year, the budget deficit was 9.5%. “In response to the policy slippages, the IMF and World Bank suspended support to Ghana as they had done in 1992,” notes Dr Bawumia.
After eight years of economic indiscipline, it all ended us in Ghana being declared a Highly Indebted Poor Country by 2001, with our debt stock larger than the size of the economy. Dr Bawumia tells us, “The excessive fiscal expansion in the run-up to the 2000 Presidential and Parliamentary elections tipped the economy into a cycle of inflation and currency depreciation [and unsustainable debt].”
Under the NPP’s President Kufuor, 2004 election was not like that, though. “In Ghana’s recent economic history 2004 is the only election year in which economic discipline and stability was maintained. The fiscal deficit to GDP was 3.2% in 2004,” he says of the NPP.
But, even the NPP slipped in 2008, with crude oil prices hitting record hikes of $147 per barrel on top of global food and financial crisis. The deficit was 6.4% of a rebased economy, mitigated only by the highest economic growth in Ghana’s democratic history of 8.4%.
Yet, NPP’s loosened fiscal discipline in its crucial third term consecutive push for the people’s mandate in 2008 was nowhere near what we saw in 2012, when President John Mahama was only pushing for his first full term in office and the NDC’s second consecutive term. In 2012, 12.1% (or 11.9 % if you go by the revised figures) was the deficit, and the effects may continue to be felt until 2016.
To me, the NDC by breaking the central bank to ‘steal’ the 2012 elections was akin to signing the biggest suicide pact in Ghana’s democratic history and the electorate only needs to kick the chair beneath their hanging feet in 2016 to confirm this.
Let me attempt to sum up Bawumia’s description of the damage that the NDC has caused to the country since 2009: reckless spending, corruption and fiscal indiscipline have combined to kill the energy of the economy to create jobs.
Bawumia says, “We all know of school leavers and graduates who are having great difficulty finding a job in this economy. Youth unemployment remains high and increasing and there has been no better Ghana for our youth in the last five years. Mr. Chairman, this is worrying because we seek fiscal and monetary discipline not for their own sake but to create an enabling environment for job creation.”
NDC has borrowed $20bn within the last five years alone, and spent GHC1bn on GYEEDA, specifically to create youth unemployment, and yet we cannot feel the impact.We cannot doubt the idea behind GYEEDA. In fact it is very much in line with the 2006 African Youth Charter. What has gone wrong is the abuse of the programme by the NDC. This has everything to do with what the government considers to be its number one priority: winning elections at all financial cost.
Ghana’s 2012 budget deficit of GH¢8.7 billion wasthe highest in our history. The NDC had a good go in 2012 at telling the people that Akufo-Addo’s free secondary school policy was not realistic.
Bawumia’s response to that is telling:“The GH¢8.7 billion deficit would have been able to finance seven years of free secondary school education.”
You have to ask yourself the question, what will be the point of the ritual exercise to read the 2014 budget? This government has made it consistently clear, especially with the 2012 and 2013 budgets, that what it tells Parliament it will do in its budget statements has nothing to do with what it ends up doing.
For example, the NDC Government spent in 2012 double the revenues it raised: spending was“34.5% of GDP even though government revenues amounted to 16.1% of GDP (a gap of over 100%) for the year.” Parliament had no idea this was to happen and no useful explanation has since been given.
By the way, where is the 2012 Auditor-General’s Report? Why has it taken so long to be made public? What is it that is delaying the details of how the people’s money was recklessly abused?
Simply put, “The government abandoned all fiscal discipline in an attempt to win the 2012 elections,” says Bawumia.
Bawumia points out further, “This NDC government is the first government in the history of Ghana to have access to oil revenues and yet is finding it difficult to pay its bills because of the indiscipline in its management of our public finances.” In other words, this NDC government is the luckiest since Kwame Nkrumah inherited a debt-free economy in 1957.
Worsening unemployment
How is all this affecting jobs? “The cost of doing business has increased and confidence in the Ghanaian economy has waned with high interest rates, a weakening currency and increased utility prices,” the former Deputy Governor of the Bank of Ghana reminds us.
Bawumia explains further, “The non-oil sectors of the economy, in particular agriculture, industry and services are still growing slower than they did in 2008 [8.4% GDP growth]. In 2012, real GDP growth was 7.9 percent (including oil). It is clear therefore that notwithstanding the production of oil, the non-oil sectors are experiencing declining growth. There is a noticeable slowdown in economic activity and both business and consumer confidence have weakened. The economic slowdown has meant that unemployment is getting worse.”
The Youth
The unprecedented growth in corruption is denying the youth access to jobs and income. When you are using the same amount that will build 3 schools to build one, you are denying work to three times the people in employment, effectively. We must fight corruption to create jobs.And, we must create jobs to beat down the crime rate.
The NDC reckless spending of 2012 has exposed them as not for the people. What is socialist about cutting down spending on social welfare programmes implemented by the NPP?Akonfem Socialism it certainly; False Populism, pure and simple.
Bawumia laments, “The Free maternal care, school feeding and national health insurance programs to protect the poor and vulnerable inherited by the NDC government are having major challenges, to put it mildly.”
The youth must wake up to the deliberate and consistent efforts to kill their future. What the NDC is doing is building up debts for the youth to pay, whilst ignoring its responsibility and promise to invest in the youth today for them to be able to deal with the challenges of that tomorrow.
This is a government of wasted opportunities!
Bawumia says, “Ghana’s total public debt has increased from GHC 9.5bn in 2008 to GHC43.9 billion as at August 2013 (an increase of 357% in less than 5 years)! Mr. Chairman, the NDC government has borrowed the equivalent of $20 billion in just the last five years!”
He points out, “What is worrying is that they tell us that this is only the first gear! Can you see or feel that $20 billion dollars has been pumped into this economy in the last five years? Where are the projects to show for the $20 billion? Just imagine the transformational effect if every region were given $2 billion for development projects.”
Reverse gear
Why are we in reverse gear? NDC’s ambition for 2013 is to achieve what Kufuor achieved in his difficult election year, 2008, and even that target would be missed!
DrBawumia: “At the end of 2008, the government budget deficit to GDP ratio stood at 6.5% (after the rebasing of GDP). This outcome was described by the NDC as bad fiscal management. By the end of the election year 2012, the budget deficit had reached some 12% of GDP (after rebasing of GDP). This is double the deficit in 2008 which the NDC described as reckless! Interestingly, Mr. Chairman, today the NDC government’s objective in the medium term is to get to a budget deficit to GDP ratio of 6.5%, the same as was the case in 2008, which they called reckless! This is what is called reverse gear, not first gear.”
Just last month, Finance Minister Seth Terpker told us not to expect that 2008 target even being met. He is now hoping to reduce the 2013 deficit to 9.0% of GDP; but that could still end up being missed, too!
The single spine lie
Another keynote from Bawumia’s speech, which NPP should Vicky-Hammer until that donkey-ass becomes flat is the lie that all our woes is due to the implementation of the single spine salary structure. It is a lie that the international community appears to have bought into as well.
The fact is this: the cost of the wage bill in 2012 got to 70% not because of the wage bill, per se, but because of wage arrears built up from previous years. It gets there when government refuses to pay agreed salaries when due, and not because of the actual cost of implementing the single spine.
Dr Bawumia: “The refrain from Government is that wages and salaries of government workers account for over 70% of government revenue so workers should endure economic hardships or pick the next available flight out of the country. What are the facts?
“At the end of 2008, the Government wage bill amounted to GHC1.98 billion, representing 41.3 percent of total domestic revenue of GHC 4.8 billion and 46% of tax revenue. By the end of 2012, after 99% implementation of the single spine salary system, the government wage bill jumped by some GHC4.6 billion to GHC6.6 billion. While the government wage bill increased by some GHC4.6 billion between 2008 and 2012, total government revenue also increased from GHC4.8 billion to GHC15.5 billion over the same period. The increase in domestic revenue by GHC10.7 billion was more than twice the increase in the government wage bill.
“Indeed, by the end of 2012, the government wage bill following the implementation of the single spine salary system was 42.9% of total domestic revenues. This is not significantly different from the 41.3% in 2008. Furthermore, the 2013 budget forecast that the wage bill in 2013 would represent 35% of total domestic revenue by the close of the year. The current economic difficulties can therefore not be attributed to the single spine salary system which had been 99% implement at the end of 2012.”
Why the NPP did better and can do more:
Dr Bawumia: “Without the benefit of oil production, economic growth increased from 3.7% in 2000 to 8.4% in 2008. In the process, the size of Ghana’s economy increased from some $5.1 billion to $28.5 billion, a six-fold increase. Even in the face of a global economic and financial crisis in 2007/8 (with oil prices reaching a record high of $147/barrel) economic growth in 2008 rose to 8.4%. Ghana was transformed during the period of the NPP’s tenure (2001-2008) from a low income HIPC economy to a lower middle-income economy on the frontiers of emerging market status. We were ready to take off and had left the first gear a long time ago!”
Again, “The period between 2001-2007 recorded the lowest depreciation of the cedi in any seven year period since exchange rates were market determined and demonstrates that it is possible to have very stable exchange rates with disciplined economic management.”
Bottom line, in 2016, NDC may return to emptying the coffers to, as accusations and evidence go, steal and buy votes. The least that we can all do now is to educate the public as to the cost of enduring hardships for nearly four years to be bought with peanuts on election day to suffer again for the next 4 years.
Bawumia’s call for discipline in economic management is sound. He says, “Discipline in economic management has three elements: (1) having a clear vision of what a government or a leader wants to do (2) the discipline to follow through on implementing the vision and (3) the fiscal and monetary discipline to manage the implementation of the vision.”
He stresses, “Fiscal discipline basically means spending within your means over a period of time. We know that any individual who consistently spends above his or her means would end up in trouble, like the infamous Abankaba. It is no different for a country.”
What do we make of this history lesson from Dr Bawumia:
“Going back into history, so important was maintaining monetary discipline in England that by 1121, 900 years ago, when there was a noticeable decline in the quality of England’s silver, all the Mint Masters in England (those who “minted” the money, equivalent to central bank governors) were assembled and punished by having their right hands cut off!”
My take is that we should do what the English did 900 years ago and cut off the electoral heads of the NDC in 2016, making it impossible for them to grow it back for another 20 years, at least.
